Correlation Between Harmony Gold and Western Acquisition

Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Western Acquisition at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Harmony Gold and Western Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Harmony Gold Mining and Western Acquisition Ventures, you can compare the effects of market volatilities on Harmony Gold and Western Acquisition and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Harmony Gold with a short position of Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Western Acquisition.

Diversification Opportunities for Harmony Gold and Western Acquisition

0.48

Correlation Coefficient

Harmony Gold  Western Acquisition

Very weak diversification

The 3 months correlation between Harmony and Western is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition and Harmony Gold is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Harmony Gold Mining are associated (or correlated) with Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Harmony Gold i.e., Harmony Gold and Western Acquisition go up and down completely randomly.

Pair Corralation between Harmony Gold and Western Acquisition

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the Western Acquisition. In addition to that, Harmony Gold is 1.8 times more volatile than Western Acquisition Ventures. It trades about -0.02 of its total potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.05 per unit of volatility. If you would invest  1,038  in Western Acquisition Ventures on September 4, 2024 and sell it today you would earn a total of  54.00  from holding Western Acquisition Ventures or generate 5.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Harmony Gold Mining  vs.  Western Acquisition Ventures

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Harmony Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Harmony Gold and Western Acquisition

The main advantage of trading using opposite Harmony Gold and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Western Acquisition can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Acquisition will offset losses from the drop in Western Acquisition's long position.

The idea behind Harmony Gold Mining and Western Acquisition Ventures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.